BSNL 2G plans may take off countrywide as ZTE agrees to supply gear equipments

KOLKATA: BSNL's countrywide 2G network expansion plans will finally take off as the Indian arm of China's ZTE Corp has agreed to meet the state-run telco's additional GSM network requirement for 4.22 million lines in the eastern and northeastern circles, aggregating Rs 1,220 crore, top BSNL executives, who didn't wish to be named, said.

ZTE India's decision comes after BSNL recently threatened to encash its Rs 159-crore performance bank guarantees (PBGs) following the Chinese vendor's failure to meet the state-run telco's eastern zone purchase requirements by January 31, 2013. In response to ET's specific query on whether ZTE India chose to supply gear for BSNL's eastern zone expansion to avoid legal action, a company spokeswoman claimed, "There are no legal concerns between both parties as the implementation of existing order is in line with the terms and contracts of the contract."

Last year, ZTE India had edged out Huawei, Alcatel-Lucent, Nokia Siemens Networks and Ericsson to bag BSNL's mega contract for supplying 2G equipment for 10.15 million GSM lines in the northern and southern circles at $58 per line ( Rs 3,200 approx). Since none of these companies matched ZTE's price bid, BSNL asked the Chinese vendor to also supply GSM network gear for its eastern expansion in line with tender conditions. "ZTE has agreed to meet our additional GSM network gear needs in the eastern and north-eastern states over the next four months.

We expect to complete the eastern expansion by May 2014," said a senior BSNL official with direct knowledge, adding that the Chinese vendor would shortly furnish an additional Rs 73 crore performance bank guarantee against BSNL's purchase order for the east zone. It has already furnished PBGs of Rs 159.13 crore against BSNL's purchase orders for the northern and southern circles' expansion. ZTE has already kicked off 2G gear supplies for BSNL's GSM network expansion in the northern and southern circles.

But BSNL's bid to buy GSM network gear from ZTE in the east and northeast could be at odds with an interior ministry directive that discourages induction of Chinese telecom equipment in states having international borders with China, Bangladesh and Myanmar. West Bengal and several north-eastern states have international borders with Bangladesh, Myanmar and China.

"Based on concerns raised by security agencies about Chinese companies (ZTE and Huawei), and directions received from the home ministry, it was decided that resources should not be procured by BSNL from Chinese vendors for deployment in sensitive regions, which are defined as states having international borders with China, Bangladesh, Myanmar and Pakistan," says an internal note circulated last month by the telecom department's security wing, a copy of which was reviewed by ET. BSNL officials declined to comment on whether it had taken special clearances to deploy Chinese gear in the sensitive regions.